The personal-use day test
The IRS classifies a short-term rental as a vacation home if personal use exceeds the greater of: 14 days per year, or 10% of the days you rented it at fair rental price. Under vacation-home status, deductions are limited to rental income — you cannot create a net loss, and depreciation that would produce a loss is suspended.
Full rental property treatment
If personal use stays below the 14-day / 10% threshold, the property is treated as a full rental for tax purposes. You depreciate it over 27.5 years under MACRS (residential), and a cost segregation study can accelerate deductions on components such as appliances, fixtures, and land improvements. This is the foundation of the so-called STR loophole — see the cost segregation guide for STRs for details.
Material participation and passive losses
Short-term rentals with an average rental period of 7 days or fewer are generally not classified as rental activities under the passive activity loss rules. This means if you materially participate in the activity, the paper losses from accelerated depreciation may offset your ordinary income without requiring Real Estate Professional Status. The rules are technical — consult a CPA before relying on this treatment.
Frequently asked questions
Can I depreciate an Airbnb rental?
Yes, if personal use stays below 14 days or 10% of rental days. If it exceeds those thresholds, vacation-home rules limit deductions to rental income with no net loss allowed.
Does a short-term rental qualify for bonus depreciation?
If the property qualifies as a full rental, cost-segregated components generally qualify for bonus depreciation under current phase-down rules.
Sources
Educational information and estimates only. Not tax advice. Tax rules change and vary by situation; consult a qualified tax professional before acting.